Beware the deflation lobby
As a liberal it came as quite a shock to read this from John Stuart Mill, railing against the devaluation of money:
There are at this day numerous persons who can read and write, and some who think themselves oracles of wisdom, who see no harm in emancipating a paper currency from the restraint of convertibility … there are writers of pretension … who think it the duty of the legislature periodically to degrade the standard (or to authorize an increase of inconvertible paper exactly equivalent) in proportion as the progress of industry creates an increase of productions and a multiplication of pecuniary transactions.
He goes on to say “a pound (precisely as stated by Sir Robert Peel) should mean a fixed quantity of gold of a given fineness”.
Given the havoc that had been wrought by proliferating paper currency, from the time of Sung China through the Mississippi Bubble and beyond, one might understand Mill’s concern. Inflation disorders commerce, and transfers wealth from the saver to the debtor, something that must have appalled any right-thinking Victorian. More pragmatically, it raises the cost of capital, which ultimately hurts us all.
But an overly fond adherence to the solidity of currency has cost society dear in the past, and threatens to again. In the 1930s, it was the countries that left gold first that recovered first. The really stubborn ones like France had worse Depressions. With the ascendance of Keynes, more people began to understand that what matters in economics is how much is produced and consumed, and not just how much ‘gold of a given fineness’ a unit of currency can get you.
When last year the economy tumbled ever further, and the Bank of England introduced ‘quantitative easing’, some Victorian ghosts arose from the grave, in the form of various hysterics shouting about Zimbabwe, the Weimar republic and the threat of hyperinflation.
They were wrong in two ways continue reading… »
Clegg praises Thatcher, calls for more savage cuts
Fraser Nelson previews The Spectator’s interview with Nick Clegg, in which the LibDem leader has “put his heart into showing his hidden Tory side” according to the Speccy editor, who awards him a blue rose in noting his bid for a heir to Thatcher accolade.
It sounds as though it could be a major talking point at the LibDem spring conference in Birmingham this weekend, where it may not meet with universal acclaim among party members.
The LibDem leader is back in “savage cuts” territory, by arguing that the deficit should be dealt with only by spending cuts and no tax rises, which outflanks Cameron and Osborne on the right. (Nelson contrasts that with a Tory approach of 80% cuts to 20% tax rises ratio, and Labour 66% to 33%).
Age, he claims, has taught him the point of Maggie Thatcher. And, apparently, he now seems to see her as something of an inspiration, praising her for her victory over the trade unions.
Clegg may well be decisively outflanking the voters on their right too. continue reading… »
Hung parliament could sort out public finances
Given there is no sign at all that the Conservative’s disastrous 2010 campaign is likely to improve, this question of the economy’s performance with a minority government will continue.
A note from CitiGroup puts the case for the prosecution:
There is no consensus across the parties on fiscal policy, while Lib Dem voters disagree with the Conservatives on fiscal policy and prefer Labour’s policies on most other key political issues. Lib Dem voters would rather go into coalition with Labour than the Conservatives. We suspect that a hung parliament would only be able to implement and sustain major fiscal consolidation if boxed in by a market crisis. Gilts and sterling remain vulnerable.
The author acknowledges Nick Clegg’s recent vow ‘not to take any risk with UK plc’, and suspects that they LibDems will not cooperate unless given the Holy Grail of electoral reform in return. Which the Conservatives will never grant.
Clegg is getting annoyed:
“David Cameron and George Osborne are stoking up fears in the markets, actively trying to destabilise the pound and reduce the government’s ability to borrow. It’s like a protection racket: vote for us or our friends in the City will lay waste to your economy, your savings and your job.”
Too right. Chris Cook in the FT has a more nuanced summary of how things might pan out:
The threat of the LibDems pulling the plug on a government is overstated. The third party would, very quickly, be seen as co-culprits for the administration’s programme. So the LibDems would be stuck with them. If they then caused the fall of the government, they would be blamed for the chaos that follows … So the path of short-term naked self interest – the most powerful force in politics – would almost always be for the LibDems to back the administration.
The Lib Dems have the most to gain and the most to lose from the hung parliament situation. Their incentives are unambigiously in the direction of fiscal responsibility. No-ones goes around thinking “I can’t vote Lib Dem – they are too serious about the deficit”. A period where the LibDems hold the sensible middle of the debate: between diehard romantic deniers on the Labour benches, and blinkered trapped-in-the-1980s CutNowCutHarders on the other side, could gain them real credibility with a public worried about the difficult, um, balancing act that needs to be performed.
Theses on Progressive Conservatism
Republicanism, communitarianism, John Lewis, EasyCouncils, co-operatives, mutuals, the ethic of engagement, the reinvention of the firm, motivation and productivity in employee ownership and a market economy based on common ownership. Suggestive of the fact that from both the left and right a convergence will soon take place that seeks to undermine the legacy of Thatcher, or an effort from both the left and right to pretend to the electorate that they have their interests at heart? It is all rather indicative that what is fashionable in British politics today is the return to community – and the surpassing of current modes of government and market structure.
Progressive conservatism, a project by Demos and led by Max Wind-Cowie, rolls with this contingent, and like the Red tory Philip Blond, is avowedly anti-Thatcherite with regards to an embrace of greed and yuppie idolatry.
At a time when industrial plants are closing down, there are massive job losses, such as the current events in Middlesbrough with the Corus steel factory, with little that Labour can do about it – even if Peter Mandelson, First Secretary of State,Secretary of State for Business, Innovation and Skills, had acted a little sooner – and by disavowing Thatcher (whose image is synonymous with factory closures) a new generation of Tories seek to throw off their nasty party image. continue reading… »
Redundancy Island
How a group of laid off workers took over an uninhabited island and began their protest.
When so-called “reality TV” programmes started mushrooming up one after the other, many commented on the fact that the only “real” thing about them was in the name.
And yet, as they quickly saturated television, their artificial, dumb and repetitive formula will probably be judged by history as the Noughties’ worst cultural legacy.
Back in 2005, we wrote that a Temping Idol or Casual Employee Academy would have been a good antidote to the binge of televisual fakery that goes by the name of “reality”.
Now, a dramatic story is actually underway and it’s no fake.
A group of workers barricaded themselves on Asinara, a small island off the northern coast of Sardinia. For decades, and until 1997, the island was used as a maximum security prison, and its only inhabitants were prisoners and warders.
After being collectively laid off four months ago, on February 24, a group of workers from a chemical company called ENI landed at Asinara and set camp at the old prison.
This is when their L’isola dei Cassintegrati, “Redundancy Island”, started. Though there are no celebrity and no television crews, the workers are hoping to direct collective focus towards their plight.
Their families help them set up a Facebook group which has already gained over 14,000 supporters. It reads:
“Redundancy Island is a ‘real’ reality, unfortunately, where no-one is famous but everyone is jobless. Hidden away on an island which is the symbol of what a once Great Sardinia which is now in the throes of a deep crisis, we are dwelling in cells which are no worse than the prison bars that the national government, the regional one and ENI presented us with.
There are no yachts, billionaires or showgirls on this island, just the crude reality of unaccountable politics and a state-controlled company – ENI – pursuing its business goals as they trample on hundreds of families. Not least, a group of brave workers fighting for their rights”.
Since redundancy notices were served in November, the workers have had to make do with a single 800 Euro payout.
“It’s embarrassing that we have to mimick Celebrity Island to remind people of what’s going on in both Italy and Sardinia”, said one of the protesters to Italian daily la Repubblica.
TUC – Women will be hit hardest by public sector cuts
A new report by the TUC, which is published today to coincide with the start of its annual Women’s Conference, indicates that women are likely to bear the brunt of any job losses resulting from early cuts in public services.
The report, Women and the Recession – One Year On, warns that early public spending cuts would hit female employment hardest because around four in ten women work in public sector occupations, compared to less than two in ten men.
Of particular concern here is the fact that those regions in which women are most likely to rely on the public sector for employment (Wales, the North East and Yorkshire and Humber) also have some of the highest male unemployment rates in the country, making it very likely that early spending cuts, of the kind favoured by the Tories, will result in a substantial rise in the number of families in which neither of the parents are in work.
The report also notes that job losses and other cuts in public expenditure will have a long-term impact on women by substantially reducing their retirement income.
Currently, the average income that women receive in retirement is a third less than the male average, a figure that would be far worse were it not for the superior record of the public sector in providing decent pensions for women and lower-paid staff. With women holding almost two-thirds (64.5 per cent) of defined benefit schemes in the public sector, any cuts in pension rights would disproportionately fall on them.
The report also estimates that women are currently subsidising the public sector to the tune of around £5billion a year in unpaid overtime.
Commenting on the report, TUC General Secretary Brendan Barber said:
“Slashing public spending may satisfy fiscal hawks and city traders but it would cause misery to millions of people who have already suffered from the recession. A fresh wave of public sector job losses could leave many families with both parents out of work.
“Many women choose to work in the public sector because it offers secure work with a good work-life balance and a decent retirement income. It’s hardly fair that these are now all under threat thanks to the mistakes of super-rich bankers, who are already back collecting their bonuses.
“When politicians talk about the need for deep spending cuts they rarely say how this would affect ordinary working people. But as our report makes clear – women would have to pay for these cuts with their jobs and pensions.”
The full report can be downloaded here.
How apprenticeships cut youth unemployment
Youth unemployment data across the EU suggest that countries with more developed apprenticeship policies have minimised the worst effects of the downturn.
In Britain, 17.9% of those below the age of 25 are unemployed. True, some countries are faring even worse. The percentage is 21.5 per cent in Ireland while, in Spain, the jobless amount amongst the young has now reached a staggering 42.6 per cent.
Countries like Denmark and Germany, however, show a different picture – with the unemployment rate amongst the under-25s standing at 8.9 and 10.5 respectively.
Of course, there is no obvious reason for this disparity. However, Germany has long been known as a country placing apprenticeships at the core of its education system.
The German system is a model for youth work contracts. It is called ‘the dual system’. Once completed compulsory education, either at 16 or 19, a worker can start an apprenticeship at a company which can last between 2 and 3 and 1/2 years. During this period, for two days a week, the apprentice will have to learn the theoretical background at a vocational school known as Berufsschule.
The precise skills and theory taught on German apprenticeships are strictly regulated. The employer is responsible for the entire education programme.
There are aroud 350 trades to choose from: anything from accountant to builder or from medical worker to baker.
About two thirds of young people who finish school decide to begin an apprenticeship every year.
The fact that the contract is really an ‘apprenticeship’ doesn’t mean that the worker has no rights. Unlike other countries such as Italy, contracts designed to help the young are not misused to maximise profits out of unprotected workers. The company is required to pick up the social security costs as well as unemployment insurance and pension entitlements.
What varies is the salary. For instance, an apprentice metal worker in the Baden-Wurtemberg region will earn around 810 Euros a month during his first year, €861 in his second, €937 in the third and €988 in his fourth. His counterpart in Berlin will probably take home €100 less each month.
This can partly explain why there is a lower percentage of university students in Germany when compared to other Western countries, but there is a much lower percentage of people entering the German labour market with no qualifications. This seems to have protected, at least partially, German workers and job seekers from the worst effects of the downturn.
Britain, instead was hit on two fronts.
One one side, the 1980s and 1990s saw a sharp decrease in the number of apprenticeships which was only reversed through increased investment since 1997. The number of learners of all ages starting on the Apprenticeships programme has more than doubled from around 75,000 to around 180,000 today.
On the other side, the Labour government was guilty of placing unrealistic expectations on the University system. You may remember the old Blairite obsession with having 50% of people in Higher Education by 2010. It was never going to be economically sustainable, which is why the Government is now -very shyly- trying to support graduate internship positions.
At the moment, it’s not going very well. Out of 725,000 unemployed 18-24 Britons, there are 3,400 graduate internship positions, only 47% of which are paid.
Redwood wrong on borrowing
This effort from John Redwood seems to contain many of the errors that arise when economic thinking is subordinated to party political motives: confusion, lack of empirical evidence, and an over-emphasis upon the importance of policy.
He says:
Borrowing is deferred taxation…
Taxpayers will have to help repay all that debt with interest in the years ahead. They know that means tax increases to do so. More borrowing can make people more negative about spending up to their current incomes.
A reasonable hypothesis – though he doesn’t provide any hard evidence that this is actually happening. But then he says:
Much of the money the government is borrowing will be lent by banks. This is money the banks will not then be able to lend to the private sector…No wonder money supply growth is weak, and no wonder the private sector finds it difficult to borrow enough at a sensible rate.
There are two problems with this claim. continue reading… »
Is a Labour election win a poisoned chalice?
Given the Tories’ continuous slide in the polls, there was an almost tangible feeling of opportunity at last night’s “Osbornomics” event.
Hosted by the New Political Economy network and Compass, debate was mainly focused on what can be expected from a Tory chancellor.
The audience and panel focused enthusiastically on how Labour can stop the Conservatives, and even what it can do differently if it wins. There was talk of a hung parliament with Vince Cable as Chancellor, even of a small Labour majority.
As members of the audience and panel became enthusiastic about a Labour resurgence, the understated but excellent Andrew Gamble had a small and important point to make: be careful what you wish for.
continue reading… »
Why it’s right to increase maternity pay
contribution by Andy Wimbush
On Monday, the Financial Times ran an article revealing that the EU were planning to increase maternity pay, boosting “the minimum statutory benefits for new mothers, which vary markedly between the European Union’s 27 member states.”
The other papers have since picked it up, and have done the rounds of various business lobby groups, asking for quotes that condemn the EU plans and warn of the burden that the increased costs would place on businesses and the economy.
I’ll examine some of the claims made by lobby groups and see whether they stand up to the evidence.
continue reading… »
The Tories want more class war
What sort of newspaper runs with headlines such as ‘We must arm ourselves for a class war’?
I mean, not even publications of the kind that get flogged outside Dalston Kingsland shopping centre of a Saturday routinely urge the comrades to break out the Kalashnikovs. That sort of juvenile ultraleftism is just embarrassing.
If you were just about to say Socialist Worker in response to my opening question, you may be surprised to learn that the correct answer is the Daily Telegraph this morning. No kid.
In fairness to economics editor Edmund Conway, I suspect the subs were getting a little carried away.
The piece at no point actively incites the bourgeoisie to stockpile automatic weaponry in anticipation of the need to gun down hordes of Jobseekers’ Allowance claimants on the rampage through the leafier parts of Richmond upon Thames.
But the article does offer an insight into what sections of the right are thinking right now.
continue reading… »
Right wingers launch “British Tea Party”
The Tory right is getting a British Tea Party movement off the ground this Saturday, aiming to build an anti-tax movement.
Its being organised by the Freedom Association, starring right wing Tory MEP Daniel Hannan.
As we will no doubt hear again and again, its a good moment for an anti-tax revolt.
After all, the 2010 British Social Attitudes survey shows public support for tax cuts and spending cuts has doubled since 1997, from 4% to 8%.
continue reading… »
Why Tories are deluding themselves over Brown’s gold sell-off
If the Tories had won the 2001 election, would Britain’s fiscal position been in any better shape? Spending would have been less, but we might have had huge tax cuts instead, a bigger housing boom… Or, instead, if they had cut the deficit, would rates have been lower, the housing boom even more out of control?
Only the truly idiotic would think that Brown bringing in the FSA somehow led to the financial crisis. But you still read it from time to time.
However, one piece of counterfactual history is SO easy that the Right can seldom resist bringing it out against Brown, and that is the Decision to Sell the Gold. Leading from this Times’ article , Tim Montgomerie at ConHome can barely contain his gloating on the subject (hat tip LeftOutside).
But I think LO’s attempt at a defence – continued on here on LibCon – does not go far enough.
continue reading… »
When will we learn the lessons of Private Equity?
Rewind almost three years and the trade union movement was embroiled in a bitter media spat with the private equity industry.
In a portent of something much bigger, private equity firms were accused of playing fast and loose with high levels of debt to buy up companies they neither understood nor cared for in order to make a quick buck.
But the ridicule aimed at the unions in the Summer of 2007 was often intense. It reached its nadir when the Chair of the All Party Private Equity Group, Sion Simon, went Paxo on the TUC General Secretary at a hearing of the Treasury Select Committee.
Simon asked Brendan Barber six times in quick and testy succession to produce the evidence that private equity firms increased risk for the companies they acquired.
Well, the evidence is now here.
continue reading… »
Teenage Pregnancy – It’s the economy, stupid!
Last week, I looked at the some of the evidence for the apparent relationship between socio-economic deprivation and conception/abortion rates for English local authorities and arrived at two main conclusions:
1) There is a strong positive correlation between deprivation and conception rates in under 18’s – the more deprived the area, the higher the conception rate.
2) There is, when you exclude London, a solid negative correlation between deprivation and abortion rates – the less deprived the are, the more likely a pregnant teenager is to terminate their pregnancy.
One question that came up several times in comments was, inevitably, that of why England has the highest conception and abortion rates in Europe.
Part of the answer lies in the fact that one follows the other, if you measure both in rates per 1,000 teenagers but that’s only part of the story.
Relative to much of Europe, England has a fairly modest rate of abortions relative to the annual number of conceptions amongst teenagers.
continue reading… »
Taking from the poor and giving to the rich
Here are three stories which are more closely related than they seem. First:
Workers judged to be lonely and to have a chaotic home life could be barred from working with vulnerable people, even though there is no evidence that they pose a risk, according to guidelines from the Government's new vetting agency…
If a teaching assistant was believed to be "unable to sustain emotionally intimate relationships" and also had a "chaotic, unstable lifestyle" they could be barred from ever working with children.
If a nurse was judged to suffer from "severe emotional loneliness" and believed to have "poor coping skills" their career could also be ended.
Second:
People who inform on benefit cheats could be given a share of the resulting savings to the state under proposals being examined by Labour’s manifesto team.
Third:
Shares in state-owned banks would be offered to voters at a discount as part of a Tory effort to encourage young people and those on modest incomes to invest, George Osborne has announced.
The shadow chancellor said his "people's bank bonus" would reward taxpayers for the £850 billion ploughed by the Government into propping up crisis-hit financial institutions.
The common theme here is that these stories show that the state is not a rational force for justice, but rather a means of bullying the vulnerable whilst handing cash over to its favourites.
continue reading… »
What happened to Brown’s Gold?
In 1999 Brown as Chancellor of the Exchequer sold 400 tons of gold at the bottom of a 20 year slump in the gold market. He sold at $275 an ounce and could get closer to $700 now.
Conservative Home’s Left Watch argue that, by being patient and waiting for the price of gold to more or less triple, the French have made 50% more than Gordon Brown on gold sales having only to sell half as much.
Tim Montgomerie asks “Is there a more powerful example of Brown’s incompetence?”
When it comes to the matter of how the Gold was sold I think that is fair comment, it really does seem that Brown didn’t know how to best sell gold – and more damningly – didn’t try to find out the best way either.
By announcing the sale in advance it is reckoned that he depressed the market by around 10%. Record numbers of investors took up “short” positions on Gold in anticipation of the sale.
continue reading… »
BBC white-washes Geoffrey Howe’s record on unemployment
And I thought Nicholas Winterton was out of touch with ordinary working people!
Never fear, Nick, the BBC’s outdone you. Here’s BBC News (from 6 mins 45 secs in) commenting on Geoffrey Howe’s approach to post-recession fiscal management in 1981:
Then he planned to tighten the budget even as the country was coming out of recession.
And this was the reaction: a letter from the Times from 364 economists arguing he was doing the wrong thing. The eminent list of academics included Professor King, now Governor of the Bank of England.
History proved Geoffrey Howe to be more right than they were.
You fucking what? Try telling that to people who needed a job in the 1980s.
continue reading… »
16, pregnant and middle class – What the papers don’t say
Do the Tories really want to pick a fight over the issue of teenage pregnancies?
The reason I ask is not just because of the Tory’s latest statistical debacle; although it has to be said that their inability to get a decimal point in the right place hardly inspires confidence in a party that has aspirations of becoming the next government and taking over the running of the economy.
Last year, I put together a (popular) article that sifted some of the facts about teenage pregnancy from the media-driven fiction.
With an election in the offing, and the Tories already threatening to turn this issue into a political Aunt Sally, yet again, its seems to me to be about the right time to revisit this issue again and look at what the evidence has to say rather than what the Daily Mail would like you to believe.
continue reading… »
James Purnell’s confusion on markets
It’s common for some people to have excessive faith in the power of markets. It’s also common for others to be excessively hostile to them.
Congratulations, then, to James Purnell – because, in a fantastic example of triangulation, he has committed both these errors. He says:
Markets are a wonderful tool: innovative, wealth-generating and elite-busting. But sometimes they don’t serve society. We should bring back the old usury laws so no one need fall victim to loan sharks. We should campaign for a living wage so that no one who works hard ends up in poverty.
These are silly proposals. If we outlaw usury, we won’t abolish loan sharks, but encourage them. Banning usury means that legitimate lenders won’t lend to bad risks because they‘ll not be able to charge a high enough interest rate to cover the risk of default. Such people will therefore turn, as Joe did, to loan sharks. If you criminalize sub-prime lending, criminals will become sub-prime lenders.
continue reading… »
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» Why don’t MPs pay back tuition fees instead of increasing ours?
» Obama is right to slam BP – and why capitalists should too
» Why does Phillip Blond see civil cohesion as a security issue?
» So what if the Labour candidates went to Oxbridge?
» Last night’s Labour hustings: will it get interesting or turn to torture?
» It’s now down to Ken to win London for Labour
» The Labour people need
» Blog Nation: what would you like to see discussed?
» The Labour leadership’s token contender.. and it’s not Diane Abbott
» In defence of these fraternal nominations
» Is this the end for the socialist left?
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